By John Paul Rothenberg and Anaya Jhaveri
ABA Data Bank
ABA’s Office of the Chief Economist provides in-depth analysis of the quarterly SLOOS that goes beyond the official summary release from the Fed.
The July 2025 Federal Reserve Senior Loan Officer Opinion Survey (covering the second quarter) reveals a striking split in how large banks are navigating the current credit cycle compared to the rest of the industry. (The SLOOS defines “large banks” as those with total domestic assets exceeding $100 billion as of March 31, 2025. All other respondents are referred to as “other banks” and had average assets of about $37 billion. In total, 65 banks participated in the survey, including 23 large banks and 42 other banks.) In most categories and especially real estate lending, large banks eased lending standards on net, while other banks tightened theirs, a notable divergence in credit policy. The divergence is also apparent on the demand side with other banks reporting consistently weaker demand than large banks. Even in commercial and industrial (C&I) loans, where banks of all sizes continued tightening credit standards, a deeper dive into the data shows that other banks are tightening more, seeing weaker demand, and are more pessimistic about C&I lending than large banks.
Figure 1 shows the net responses of large and other banks for standards (left plot) and demand (right plot) across the loan categories queried. (Net is defined as the percent of banks that eased standards minus the percent of banks that tightened standards or the percent of banks that reported stronger demand minus the percent that saw weaker demand.) Standards show a notable divergence where large banks eased standards on net while other banks tightened. Large banks only tightened on net more than other banks in one of sixteen loan categories (consumer, excluding credit card and auto). Further, large banks reported net easing in half of the loan categories while other banks showed no net easing in any category.
In commercial real estate, which includes multifamily, construction and land development (CLD) and nonfarm nonresidential (NFNR), large banks show net easing, while other banks show net tightening. The clearest split is in multifamily, where large banks show a significant net share easing in the figure at a reading of almost 30%, while other banks show a net share tightening at over 20%. NFNR and CLD show a similar pattern. In residential mortgages, the divide is milder with large banks easing or staying neutral whereas other banks are reporting a modest net tightening less than 10%. Consumer categories showed relatively more alignment across bank sizes: standards for credit cards and for consumer loans (excluding credit cards and auto), hovered near flat to modestly tighter, while auto loans saw large banks ease slightly and other banks holding roughly unchanged.
On the demand side, which is the right plot on figure 1, the survey also finds stronger loan demand at large banks compared to other banks. For example, large banks experienced generally rising demand, while other banks saw significant demand deterioration, with net shares around 20% reporting weakening demand across most major loan categories. Home equity lines of credit were a standout loan product for large banks with a major net share of over 50% reporting stronger demand, versus a neutral reading for other banks. The main area of alignment across both categories of banks was commercial and industrial loans, where both cohorts reported weakening demand from large and middle market firms as well as smaller firms.
Figure 1
Figure 1 explanation: This chart shows the net percentage of bank responses in the SLOOS for lending standards in the left panel, while the right panel covers loan demand. Each row represents a loan category, grouped into four segments: Commercial & Industrial (C&I), Commercial Real Estate (CRE), Residential Real Estate (RRE), and Consumer loans. White filled circles mark Large Banks, while black filled triangles represent Other Banks. The outline color shows the direction of the net response—red for negative, green for positive, and black for zero. The horizontal axis shows the net share of banks, in percent, reporting each outcome.
C&I loans deep dive
In Q2 2025, a modest net share of banks tightened C&I credit standards, with about 85% leaving them unchanged. The net share of banks tightening was about 5% among large banks and 10% among other banks. However, a closer look shows that beneath those modest headline numbers, the two groups are reacting differently. Large banks leaned toward easing, citing competition as the dominant reason and reporting more accommodative loan terms across areas like maximum size for credit lines, covenants, and pricing terms. Other banks, by contrast, leaned toward tightening, pointing to the economic outlook, regulatory changes, and industry-specific problems as reasons to keep terms restrictive. In short, large banks were competing for business, while other banks remained defensive, setting up a clear divergence in C&I lending posture.
Loan supply
Figure 2 shows a notable split in how large and other banks adjusted C&I loan terms. Large banks leaned more accommodative across nearly every category, while other banks were more cautious. For example, large banks reported net easing for maximum credit line size (+13), loan covenants (+4), and cost of credit lines (+4) compared with other banks that remained net negative or neutral (-4, -7, and -2, respectively). Similarly, on risk premiums and collateral requirements, large banks were neutral while other banks showed continued net tightening (-10 in both cases). The only area of directional alignment was interest rate spreads, where large banks were moderately easing on net (+18) while other banks were closer to neutral (+4). Overall, the chart highlights that large banks were easing terms and offering larger loans at lower prices to compete for business, while other banks were still retrenching, keeping conditions tighter.
Figure 2
Figure 2 explanation: This chart compares the percentage of banks changing loan terms for C&I loans to large and middle market firms for Large and Other banks in the latest survey using a combination of barbell and divergent bar charts. Each arrowed line (“barbell”) connects the net respondent percent for Large banks (black dot) and Other banks (blue dot) for Q2 2025, showing differences in each term between bank cohorts. The arrow is colored red for a net negative difference and green for a net positive difference. The categories are sorted from the most net negative category to the most net positive for Other banks. The shaded bars behind each barbell display the distribution of responses for Large banks above the arrow, and Other banks below the arrow: dark red/green indicate “considerable” changes in tightening/easing, while lighter shades show “somewhat.” Neutral responses are not shown.
Figure 3 highlights a clear divergence between large and other banks in their views on the drivers of C&I credit standards. Larger banks generally lean more toward easing, while other banks remain much more negative. The sharpest contrast is in the economic outlook where other banks cite it as a reason for tightening (a net reading of -40 with about 20% citing it as a “very important” negative), large banks are neutral (0), suggesting the biggest institutions are more confident about weathering macroeconomic uncertainty.
Competition stands out as the single largest driver of easing among large banks. A net 63% of large banks reported competition from other banks or nonbank lenders as a reason to ease standards, by far the strongest positive factor they cited. Importantly, this represents a majority of large banks, and none listed competition as a reason to tighten. Within that 63%, almost half (27%) flagged it as a “very important” reason, underscoring the intensity of the competitive pressure at the top of the market. By contrast, a net 25% of other banks pointed to competition as a reason for easing, highlighting that the aggressive lending posture is concentrated among the largest institutions.
In an area of agreement, both cohorts report higher net tightening tied to legislative or supervisory changes (-30 for other banks vs. -18 for large banks) and industry-specific problems (-27 for other banks vs. -10 for large banks) reinforcing that the volatile policy environment is affecting the whole sector. Notably, roughly 20% of other banks cited industry-specific problems as a “very important” reason, potentially indicating problems with the small-to-medium-sized businesses to which they tend to have more exposure relative to large banks. Taken together, the chart reinforces that in the second quarter, large banks are being pulled toward easing by competitive forces, while other banks are still responding defensively to regulatory and economic headwinds, pointing to an increasingly bifurcated C&I lending landscape.
Figure 3
Figure 3 explanation: This chart compares the percentage of banks citing reasons for changing loan terms for C&I loans for Large and Other banks in the latest survey using a combination of barbell and divergent bar charts. Each arrowed line (“barbell”) connects the net respondent percent for Large banks (black dot) and Other banks (blue dot) for Q2 2025, showing differences in each reason. The arrow is colored red for a net negative difference and green for a net positive difference. The categories are sorted from the most net negative category to the most net positive for Other banks. The shaded bars behind each barbell display the distribution of responses for Large banks above the arrow, and Other banks below the arrow: dark red/green indicate “very important” reasons in tightening/easing, while lighter shades show “somewhat important.” Neutral responses are not shown.
Loan demand
Demand for C&I loans weakened noticeably in the quarter, continuing the trend from the first quarter. About 25% of large and other banks reported lower business demand, with both groups noting a decline, a rare area of agreement in the Q2 survey. Figure 4 shows the time series of demand for large banks on the left and other banks on the right. Notably very few banks reported positive demand as can be seen by the minimal green bars on the latest reading, while over 30% of banks report seeing weakening demand.
Figure 4
Figure 4 explanation: These charts track changes in loan demand from small firms over time for Large banks on the left plot and Other banks on the right plot. The stacked bars show the percentage of banks reporting loan demand has weakened (red shades) or strengthened (green shades), with darker colors indicating more significant changes. The blue dotted line represents the net percentage (strengthened minus weakened), highlighting the overall trend each quarter.
Both large and other banks report net declines in C&I loan demand, but other banks are more eager to name multiple culprits—signaling deeper pessimism in their read of the same trend. Figure 5 shows the percentage of banks citing reasons for changes in C&I loan demand. Among the seven listed reasons, only two register as net positive reasons for demand from large banks, while none do for other banks. However, significantly higher shares of other banks cite the various factors as reasons for weaker demand.
An overwhelming share of other banks cited longer-term drivers as reasons for weaker demand for C&I loans. At Other banks, investment in plant and equipment (-82) and merger and acquisition activity (-70) were major reasons for weakening demand, compared with much smaller net shares at large banks (-10 and -20). While about 30% of large banks mentioned these as “important” drivers of stronger demand, no other bank did. Both groups, however, frequently flagged these longer-term investments as “very important” reasons for weaker demand.
The divergence is just as stark on shorter-term needs. Other banks reported weaker demand tied to inventory financing (-52) and accounts receivable financing (-47), while large banks registered these reasons as supportive of demand (+20 and +10) on net.
Figure 5
Figure 5 explanation: This chart compares the percent of banks citing reasons for changes in demand for C&I loans for Large and Other banks using a combination of barbell and divergent bar charts. Each arrowed line (“barbell”) connects the net respondent percent for Large banks (black dot) and Other banks (blue dot) for Q2 2025, showing differences in each reason. The arrow is colored red for a net negative difference and green for a net positive difference. The categories are sorted from the most net negative category to the most net positive for Other banks. The shaded bars behind each barbell display the distribution of responses for Large banks above the arrow, and Other banks below the arrow: dark red/green indicate “very important” reasons for seeing weaker/stronger demand, while lighter shades show “somewhat important.” Neutral responses are not shown.
The overall picture is of a split market: Large banks see selective signs of resilience, while other banks remain far more downbeat. Some large banks report modest green shoots in both long-term and short-term demand drivers, but every reason is reported as causing weaker demand for other banks on net.
The second-quarter SLOOS reveals an increasingly bifurcated lending market. Large banks are easing standards in select categories and citing competitive pressures as reasons to ease loan terms. Other banks, by contrast, remain defensive with tightening across nearly every segment and pointing to regulatory, economic, and industry headwinds as reasons to pull back. This split is most visible in real estate lending, where large banks report easing while other banks continue to retrench.
For C&I lending, both large and other banks tightened standards, but large banks were more selective. Both cohorts also saw weaker demand, but the interpretation differs: Large banks noted at least some reasons for stronger activity, while other banks cited a broader set of reasons for decline. That contrast reinforces the broader theme of the survey—credit is still available, but disproportionately from the largest institutions, leaving midsize and smaller banks on a more cautious footing.
John Paul Rothenberg is VP of banking and policy research at ABA. Anaya Jhaveri is a graduate student at Johns Hopkins University studying applied economics. Discover more in-depth research, dashboards, and webinars from the Office of the Chief Economist by exploring ABA’s Economic Research & Insights website.
